CFO Survey Q3 2013

Belgian CFOs: new mood of confidence

Deloitte Belgium publishes results of its Belgian CFO Survey for the third quarter of 2013. CFO optimism, a key indicator, has turned positive for the first time in 18 months. Are we finally at a turning point?

Diegem, 6 November 2013 – Deloitte Belgium announces the results of its quarterly CFO Survey, conducted between 17th of September and 4th of October. CFO optimism, a key indicator, has turned positive for the first time in 18 months. Are we finally at a turning point? Business conditions are getting better. Financing conditions remain favourable. But actual performance-to-budget once again disappointed in the third quarter, and is unlikely to catch up this year. Growth prospects remain weak, and the optimistic CFO mood has not yet translated into more expansionary business priorities.

A new mood of confidence

At the start of 2013 a pessimistic business outlook prevailed in Belgium, with only minor improvement over the first two quarters. This contrasted with clearly growing CFO optimism in most European countries where Deloitte conducts the CFO Survey.

Belgium caught up in the third quarter. “A new mood of confidence pervades the most recent survey,” reported Thierry Van Schoubroeck, Partner Deloitte. “CFO optimism has climbed to the highest number we have reported since the end of 2010, almost three years ago.”

CFOs see fewer risks in the global economy:

Over the past 15 months, the general level of external financial and economic uncertainty has steadily decreased (from 53% to 26%).

Only 17% of CFOs consider it likely that the Belgian economy will enter a new recession in the next two years, down from 33% three months ago.

For the majority of corporates, financing is available and – thanks to continued efforts by central banks across the globe to keep interest rates low – attractive. High levels of cash and appealing credit conditions suggest that many corporates are able to invest, while private equity is looking for investment opportunities as well.

CFOs have also become more positive about prospects for economic activity throughout the world (although much less so for Belgium and the Eurozone). For exporters especially (deriving at least 70% of revenues from outside Belgium), actual or expected growth in US, Japan, Asia-Pacific and the emerging markets has positively impacted their current investment plans. “On the other hand,” Thierry Van Schoubroeck counters, “for local companies, Belgium’s lack of growth continues to be an inhibiting factor to investment.”

New competition concerns

The optimistic mood has not yet translated into positive financials. Performance to budget remains disappointing in the third quarter, and worrying. Over 50% of survey participants reported their companies are running behind budget, with few hoping to catch up in the final quarter. Only 22% are doing better than budgeted.

Yet for the first time since launching the survey in 2009, concern about economic recovery is sharing its spot as the number-one concern of Belgian CFOs. They are now equally uneasy about the ability of their companies to compete in the global economy. Taking this into account, the Federal Government’s “growth policies” announced at the beginning of October (after the survey period had closed) are not likely to silence corporate calls to further reform the labour market and tax policies.

Still little focus on growth

Defensive strategies – among them cost reduction, cash flow management and efficiency improvement – remain the dominant priorities. Appetite for additional risk on the balance sheet has not seen a marked increase, notwithstanding the prevailing perception of CFOs that today balance sheets are underleveraged.

Despite the optimistic turn, this quarter’s survey does not reveal a new focus on growth among Belgian businesses. Expansionary schemes – including boosting capital expenditure, acquisitions, launching new products and services, or expanding into new markets – have not significantly gained in importance.

A turning point?

“Are we at a turning point? The current mood of optimism remains fragile, and at this point in time only marginally drives company priorities. One can only hope that the signs of optimism that we report today will not be reversed in the fourth quarter, and will be confirmed by gradually improving results as well”, concludes Thierry Van Schoubroeck.

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